The overhyped scooter company that raised $400 million in 4 months is an example of everything that’s wrong with Silicon Valley

Travis VanderZanden

Electric scooter company Bird has raised so much money from investors so fast that those investors are left defending their decisions.
While there are definitely use cases for a scooter rental business, VCs are imagining them to "fundamentally change the way people get from point A to point B," thereby justifying their investment.
We say: Not so fast.

18 months ago, a company called Bird burst onto the scene. It rents electric scooters, similar to a bike-share rental — except that renters can just leave the scooters anywhere, and someone else will gather them up and return them.

Bird began in Santa Barbara, California, and later opened up shop in San Francisco. Suddenly, seemingly without warning, people were leaving these scooters everywhere in the City by the Bay, causing controversy and gaining lots of attention.

Investors noticed and raced to invest. In April, they poured $100 million to buy into Bird at a jaw-dropping $1 billion valuation. But more VCs were banging on Bird's door, flinging money at the startup.

So Bird founder and CEO Travis VanderZanden took the money. Within four months he sold investors another chunk of his company by raising a whopping $300 million — $418 million total — with a reported $2 billion valuation. Bird may have broken speed records for launch to $2 billion valuation.

VanderZanden has already cashed out some of his equity for a few millions dollars himself, Bloomberg reported.

Common sense says that this is crazy.

In fact, so many people have bombarded Bird investors with questions on their thinking that some have taken to publicly defending their investment.

businessman scooter For instance, Mark Suster, a partner in LA firm Upfront Ventures, who invested in Bird's $15 million A round as well as its last two enormous big rounds wrote just such a blog post.

"While this reaction to such a valuation is understandable, to anybody who has seen the meteoric rise in consumer demand and actual revenue the valuation is much less surprising and may turn out to be quite conservative," he said.

Maybe.

More likely is that Bird, based in Santa Monica, is an example of the kind of more-is-always better, follow-the-herd venture investments that power the tech industry.

VCs see a young startup with a novel idea doing well, and pound down its door to be among the first investors. The premise is that it's better to spend wildly to grow fast and be first than it is to be fiscally responsible. If you move too slowly, the thinking goes, you might end up watching an upstart steal your idea and your market.

With gobs of money and a bunch of VCs on the board, a young company may continue to flourish. But it's also risky. The startup no longer needs to operate with the same financial restraint, and VCs will often pressure the founder to accelerate their growth far enough and fast enough to vindicate their investment.

In this case, VCs are seeing Bird's traction and thinking it could be the next Uber. It involves people renting, instead of buying, which can lead to a higher lifetime customer value. And it solves urban transportation problems, a market that Uber proved exists.

To be sure, there are reasons to like the company. The actual Bird service has garnered positive word-of-mouth, even as it extends its reach from its home of Santa Monica, to San Francisco, to Austin, with trials going on in places like Denver, Indianapolis, and Salt Lake City. Bird also has an interesting program where it pays people to gather up the scooters, charge up their electric batteries, and put them back out on the streets.

So, there is clearly a use case for scooter rentals.

But the next Uber? Hardly.

For one thing, scooters are only good transportation under very restricted circumstances. Using a scooter on the Santa Monica bike path while spending a day at the beach? Perfect.

bird scooter Riding a scooter to a grab food during your lunch hour: maybe, if you can do it without running over pedestrians on the sidewalk or getting hit by a car on the street.

Using a scooter to head to a business meeting? Okay, in places like San Francisco, where business attire, even for middle-aged men, is a $200 hoodie and a $450 pair of sneakers.

But for the vast majority of well-dressed business folks in suits or heels, will they really routinely choose a scooter over a cab, Lyft or Uber?

And what about winter? Not much of a consideration in Santa Monica. But riding scooters in Chicago in February? Seems like a hazard.

How about using a scooter to get anywhere that is more than a short distance away? An hour's commute? In the rain? Traveling with one or more friends? Carrying groceries? Taking your kids to soccer practice?

Those considerations make scooters more of a novelty and a niche than something that every person will use regularly, like a car.

On top of that, the barrier to entry for scooters isn't high. Buying a car is expensive. You could buy your own scooter for $300. Ditto for parking. Car parking is annoying and expensive. Scooter parking is not.

The VCs have an answer to all of these obvious drawbacks. "Genius is the only way I would describe it," Jordan Nof, an investment partner at Tusk Ventures who flew to Santa Monica, California, to convince Bird to take his money told Business Insider's Melia Robinson.

"It has the opportunity to fundamentally change the way people get from point A to point B," Nof said.

To that we can only say, unconvinced: we'll see.

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